Council to revisit business fee

When Chapel Hill Town Council members proposed a significant hike in the fee for privilege licenses in June, they didn’t expect to create so much outrage among local businesses.

The result has been a summer-long saga between outraged business leaders and penitent Town Council members, with both sides saying that the fee — required to operate a business — has been unfairly implemented.

Linda Kornberg, owner of Minata Jewelers in University Mall, said that her annual fees went from $75 to $750.

During the summer, Town Council members said they received numerous e-mails and letters from the business community about the tax. On Wednesday, the Chapel Hill-Carrboro Chamber of Commerce held a forum for business owners to discuss the fee.

Council member Mark Kleinschmidt said that while the increase was relatively minor for businesses with revenues at the high and low ends of the scale, there was a sharp increase for businesses in the $500,000-per-year range.

He said council members didn’t understand the implications of that while they were examining the change, and the community didn’t offer any feedback until the night the budget was passed.

Kornberg said that if taxes on council members’ houses went up by 1,000 percent, they’d notice.

“It wasn’t thought through very carefully,” she said. “I think the chamber suggested that there be a 10-percent increase across the board. Rather than do that, they decided to increase incrementally.”

The fee is a kind of income tax, issued on a sliding scale based on a company’s gross receipts — the money remaining after each sale less the cost of the product.

Kornberg said the fee increase, which was meant to help subsidize the budget, fell on just one-third of Chapel Hill businesses because of a state law that excludes several types of professions from paying the tax.

“The council never makes decision in a vacuum,” Kleinschmidt said. “We invite citizen input … at every stage of the deliberative process. To say that we deliberately kept any information from anybody is really a gross mischaracterization of what occurred.

“There’s a general reliance on (the community) to help us evaluate whether our policy positions are the best ones, and we heard nothing from the community.”

But the community’s representatives didn’t raise any concerns when the fee hike was being discussed.

Council member Sally Greene said that a representative from the chamber and a representative from a citizen’s committee were silent about the issue and that the council didn’t intentionally do anything without the best interest of the community at heart.

Kornberg said that Aaron Nelson, executive director of the chamber, attempted to put his concerns on the Town Council’s agenda but wasn’t recognized.

“No one wants to point fingers, but this is something that slipped through the cracks,” Greene said. “I think it’s fair to say that there was some sort of breakdown.”

Town Manager Cal Horton is expected to bring a reformed proposal to the council Sept. 12, when the council reconvenes from its summer recess.

According to Kleinschmidt, a new and improved privilege license fee should be in place within a few weeks after that date.

Contact the City Editor at citydesk@unc.edu.